This is a Golden Age for health care. But at the same time new treatments and cures are being developed, Americans are properly concerned about costs. How can the health care system continue to innovate while providing value?
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Our NewsletterIssue No. 58: Rebate Reform, Suddenly Dropped by the White House, May Be Convincing Enough for a Comebac
On May 11, 2018, President Trump declared that rebate reform would be a significant part of the Administration’s strategy for constraining drug prices. In a Rose Garden speech, he said, “Our plan will end the dishonest double-dealing that allows the middleman to pocket rebates and discounts that should be passed on to consumers and patients.”
Then, last summer, five months after the Department of Health and Human Services placed a proposed rebate-reform rule in the Federal Register, the Administration backtracked. What happened? And is rebate reform truly dead, or is there a convincing case for a comeback? Why the White House Originally Wanted to Reform the Rebate System The prescription drug supply chain “middlemen” mentioned above include wholesalers, distributors and most notably, pharmacy benefit managers, or PBMs. PBMs determine the composition of formularies, the medicine chest that patients can access under their insurance plans. They extract rebates from drug manufacturers and then pocket the money themselves or pass a percentage of it on to insurers (some of which, like Cigna and UnitedHealth, own PBMs), to federal and state governments, or to private health plans. Rebates are payments from sellers to buyers, and, in the health-care sector, they would be illegal under the 1972 federal Anti-Kickback Statute if it were not for a special safe-harbor exemption applying to PBMs That exemption would be eliminated under HHS’s proposed rule, which Secretary Alex Azar said would end the “hidden system of kickbacks to middlemen.” He added, “Every day, Americans, particularly our seniors, pay more than they need to for their prescription drugs.” By ending “this era of backdoor deals,” he continued, President Trump will “deliver savings directly to patients when they walk into the pharmacy.” The Administration’s objective with the proposed rule was to replace rebates with discounts to patients at the point of purchase, perhaps as soon as 2020. The rule applied only to drugs under Part D of Medicare and to managed care organizations (MCOs) that participate in Medicaid. Congress would have to pass laws to reform the rebates for the commercial plans that cover most Americans, but, frequently, changes to Medicare and Medicaid flow to the rest of the reimbursement system. Read More Here. |
What Others Are Saying"The anger directed at the pharmaceutical and biotech industries overall is misdirected. The single biggest driving force for increased health-care spending in the U.S. is the rising cost of labor, not drugs." "Even if pharmaceutical spending were rising as a share of total health care spending, but that rise was due to pharmaceutical investments driving down expenditures in other health care areas (e.g. a reduced need for more expensive surgeries), then it would still be inaccurate to argue that pharmaceutical spending is driving overall health care inflation." |
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Cost-of-Health-Care News (CHCN) was launched on November 30, 2016, with the aim of providing news and analysis regarding a critical public-policy concern: the costs and pricing of health care. CHCN is published by EAH Strategies, headquartered in Grand Rapids, Mich. CHCN is supported by Pfizer.